European stocks made gains again on Friday as investors cheered the U.S. debt-ceiling deal.

Focus now shifts to the U.S. non-farm payroll report.

"Consensus is looking for moderating non-farm payroll growth (190,000 from 253,000), but we see some upside risks after most leading employment indicators and yesterday's ADP report surprised to the upside, " Danske Bank said.

Stocks on the Move

Shares in Adidas and Puma gained Friday after U.S. sports-gear maker Lululemon increased its earnings guidance for the year on the back of a strong fiscal 1Q, pointing to surging demand in China.

Lululemon said it also hopes to reach some $12.5 billion in revenue by 2026, from half that in 2021.

The sunny outlook--a "solid print in a sea of volatile results across the retail industry," Jefferies said --is also good news for Germany's Adidas and Puma, which will hope to regain rapid growth in the key East Asian market after recent travails including a consumer boycott and pandemic turbulence.

Shares in Adidas gained 3.4%; those in Puma rose 4.2%. Lululemon itself saw its shares gain 13% in after-hours trading following Thursday's print.

Other Stocks to Watch

British American Tobacco is expected to report a business update on Tuesday ahead of its first-half results.

The cigarette maker faces a range of longstanding issues that may weigh on sentiment, including regulatory pushback against smoking as well as menthol and flavored alternatives, its ability to create new income streams with next generation products and a $635 million fine by the U.S. for violating North Korean sanctions, AJ Bell said.

"All of these issues will be under scrutiny as [New Chief Executive] Marroco oversees the second-quarter update, which will be benchmarked against the full-year guidance for 2023 given by [Former CEO] Bowles alongside the 2022 full-year results back in February."

Read Marks & Spencer Likely to Report a Robust Start of FY 2024

Read Inditex Investors Will Have an Eye on Current Performance at 1Q Results

U.S. Markets:

Stock futures higher after the Senate voted to raise the debt limit and with the jobs report looming.

Other gauges this week have suggested the job market remains strong. Many investors believe labor-market tightness will pressure wages and force the Fed to resume policy tightening later in the summer.

Stocks to Watch

Dell's revenue plunged in the first quarter by the largest percentage on record and executives said they expect a similar drop in the current period. Shares fell nearly 3% in off-hours trading.

MongoDB reported better-than-expected first-quarter results and said it added the most net new customers in over two years. Shares rose 25% ahead of the opening bell.

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The euro should find support as there is limited scope for lower front-end eurozone yields given that the European Central Bank looks set to raise interest rates further, MUFG Bank said.

Although data showed eurozone inflation eased in May, ECB President Christine Lagarde said on Thursday there wasn't clear evidence that underlying inflation had peaked, while ECB meeting minutes reinforced "the prospect of at least two more rate hikes," MUFG added.

Services inflation could "well drift higher over the summer on tourism-related inflationary pressures."


The dollar continues to fall after Fed officials hinted at a pause in raising rates in June, and non-farm payrolls data at 1230 GMT could help determine whether losses continue, ING said.

"Today's U.S. NFP [non-farm payrolls] data will have a major say in determining whether the Fed hikes in June or not," ING said, adding that only above-consensus data could dampen prospects of a pause.

"Unless the May NFP surprises on the upside we would say today's DXY bias lies towards the 103.20 area."


The 10-year German Bund yield could struggle to fall meaningfully below 2.25% even as U.S. data could support a bond market rally, Commerzbank said.

A slowdown in U.S. nonfarm payrolls-with the data due at 1230 GMT-could ease market expectations of Fed interest-rate rises further, the bank said.

"Thus [it] does not stand in the way of the positive market backdrop that prevailed throughout the week," it added. "Yet, the air for 10y Bund yields seems to be getting thinner below 2.25%, as they are approaching the lower end of the recent trading range."


The 10-year U.S. Treasury-German Bund yield spread could narrow, in line with the usual behavior around the time the Fed delivers its last interest-rate rise, Societe Generale said.

"Euro area core inflation is not yet in free fall, and the European Central Bank's stance is less restrictive than the Fed's," it said. "This argues in favour of a narrower 10y UST-Bund spread."

Read Spanish Bond Spreads Unlikely to Widen for Now Amid Election Risks


Oil prices jumped for a second day after the U.S. Senate passed a bill averting a default.

Focus now turns firmly to this weekend's OPEC+ meeting at which analysts broadly expect the group to keep production quotas unchanged.


Oil's outlook in June is likely to hinge on supply trends, especially the upcoming decision from the OPEC+ meeting later this week, Hengtai Futures said.

It added that demand-side fundamentals are showing mixed signals, with U.S. data showing sharply lower inventories buoying sentiment, but a soft China macro recovery is weighing on trading confidence.

Therefore, supply-side factors may be essential in driving prices. "If officials don't offer clear price support actions at the upcoming OPEC+ meetings, investors are unlikely to turn more bullish," Hengtai said.


Base metals prices were pushing higher, while gold was flat, with investors looking to the U.S. jobs report as the next big macroeconomic indicator.


Aluminum prices will likely remain in range-bound trading this month, Hengtai Futures said.

It notes that Chinese supply of the base metal is likely on the rise, with several main producing regions expected to ramp up output as hydropower capacity becomes more abundant in the summer rainy season.

More hydropower also means lower production costs of the metal, which could further weigh on prices, Hengtai said, advising investors to stay on the sidelines and monitor the supply trend in the near term.




French Industrial Production Rose More Than Expected in April

French industrial production rebounded more than expected in April, suggesting that some pressures on output could be easing as supply bottlenecks loosen, despite the squeeze on spending caused by high inflation and rising interest rates.

Industrial output-comprising output in manufacturing, energy and construction-rose 0.8% on month in April, after falling by 1.1% in March, data from the country's statistics office Insee showed Friday.


Rio Tinto to Spend $395 Million on Australia Desalination Plant

Rio Tinto, the world's second-biggest miner by market value, said it plans to invest $395 million in a seawater desalination plant in the Pilbara region of Western Australia, where it runs massive iron-ore mining operations.

The plant, which will be built within Rio Tinto's existing iron-ore port operations at Parker Point, will support future water supply for the company's coastal operations and communities in the region, Rio Tinto said.


OPEC+ Cuts Could be More Painful

A change in behavior by U.S. oil producers could make a production cut by OPEC and its allies this weekend more effective in boosting oil prices.

OPEC+, which is made up of OPEC and its Russia-led allies, will meet in coming days to decide their production plan for the balance of the year. And the group won't need to worry as much that cutting its quotas will prompt U.S. shale producers jack up their own production to grab market share, says Rystad Energy's Jorge León, an economist who once worked for OPEC.


Germany Is Cooling. 3 Stocks to Put Your Money In.

Europe's stock market rally had to end sooner or later. Germany slipping into recession makes that seem like sooner. But there are still great companies to buy on the Continent.

European equities went on a tear last fall when fears for the region started to look overblown. A warm winter, plus deft policy responses, avoided calamities expected when Russia cut off most natural gas exports. China scrapped its zero-Covid regime, expanding a key market for European, particularly German, manufacturers. The iShares MSCI Eurozone exchange-traded fund (ticker: EZU) has soared by 40% over the past eight months. The good news looks priced in by now. "The market has recovered to more reasonable levels," says Andrew Clifton, an equities portfolio specialist at T. Rowe Price.


U.S. Is Willing to Begin Nuclear Arms Dialogue With Russia

The Biden administration is prepared to begin talks without preconditions with Moscow on steps to limit nuclear arms after the New Start treaty expires in 2026, national security adviser Jake Sullivan plans to say in a speech Friday.

But the limits on U.S. nuclear forces that the administration might accept at that point will be influenced not only by the size of Russia's nuclear arsenal but also by the pace of China's nuclear buildup, according to senior administration officials familiar with the address.


Ukraine Says It Stopped Russia's Latest Missile and Drone Attacks on Kyiv

Russia continued its aerial campaign against the Ukrainian capital of Kyiv, launching cruise missiles and drones against the city Thursday night, according to Ukraine's armed forces.

The Ukrainian air force said its air defenses intercepted all 15 of the Russian cruise missiles and all 21 of the Iranian-made Shahed drones.



Jobs Report Expected to Show Unemployment Still Historically Low

Friday's jobs report will show whether the labor market remained resilient in May in the midst of rising interest rates and elevated inflation.

Economists surveyed by The Wall Street Journal estimate that U.S. employers added 190,000 jobs in May. That would be a modest slowdown from April's gain of 253,000 and the 29th straight monthly increase. They expect that the unemployment rate ticked up to 3.5% in May from 3.4% in April, which matched the lowest reading since 1969.


Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default

WASHINGTON-The Senate passed wide-ranging legislation Thursday that suspends the $31.4 trillion debt ceiling while cutting federal spending, backing a bipartisan deal struck by President Biden and House Speaker Kevin McCarthy to avert an unprecedented U.S. default.

The 63-36 vote reflected support from both Democrats and Republicans, with backers saying the need to raise the nation's borrowing limit outweighed concern about provisions related to military and domestic spending and energy policy, among other contentious issues.


As China Risks Grow, Manufacturers Seek Plan B-and C and D

SINGAPORE-For much of the past decade, Western companies have sought an alternative to China to manufacture goods-a shift executives call "China plus one." Increasingly, the strategy looks more like China plus many.

Apple, with a sprawling production base in China, is rapidly expanding in Vietnam and India, an emerging smartphone-making hub. Crocs, which shifted production of a large share of its colorful shoes from China to Vietnam, recently stepped up sourcing from Indonesia and is also setting up in India.


When Markets Melt Down, These Traders Cash In

As investors fretted about the possibility that the White House and Republican lawmakers would fail to raise the debt ceiling, one $20 billion firm wasn't concerned about the potential stock-market mayhem.

That's because Miami-based Universa Investments reaps huge rewards in market crashes. It made billions in 2008 when the market collapsed during the global financial crisis, as well as in the 2020 crash sparked by the Covid-19 pandemic.


Cybersecurity Risks and Privacy Rules Add Pressure on Boards

Companies shouldn't wait for new rules around cybersecurity, privacy and emerging technologies to be finalized before preparing for them, lawyers say, particularly as senior executives with the right experience can be hard to come by.

Proposed cybersecurity rules from the Securities and Exchange Commission would require public companies to disclose which board members have security knowledge or experience, along with details about the board's approach to cyber oversight. The SEC published draft rules in March 2022 and is expected to finalize them in the coming months.


Debt-Limit Bill Cancels Almost $30 Billion in Pandemic Relief Funding

WASHINGTON-A deal between President Biden and congressional Republicans to lift the debt ceiling claws back billions of dollars in unspent pandemic relief funding but leaves money in place for front-line Covid-19 investments such as next-generation vaccines and testing.

Almost $30 billion in unspent funding approved during the pandemic will be rescinded under the legislation, which passed the Senate Thursday and is headed to Biden's desk, but most of that is unrelated to Covid-19. Instead, it will be taken from a host of agencies that have been looking at spending the money on such programs as highway infrastructure, disaster loans, and rural broadband expansion, according to people familiar with the deal.


Debt-Ceiling Deal Makes It Kevin McCarthy 3, Detractors 0

WASHINGTON-For House Speaker Kevin McCarthy, pursuing a bipartisan deal to avoid defaulting on the nation's debt meant putting his own job at risk. Now he is taking a victory lap, even as threats to his leadership endure in corners of his party.

On Wednesday, the California Republican successfully shepherded a must-pass bill through the House to suspend the $31.4 trillion debt ceiling into early 2025 in exchange for reining in federal spending. The bill, crafted in breakneck talks with the White House, then headed to the Senate, where lawmakers quickly passed it Thursday, to make a June 5 deadline and avoid an unprecedented U.S. default.


Biden Falls During Air Force Academy Graduation Ceremony

WASHINGTON-President Biden fell down while on stage at the U.S. Air Force Academy on Thursday after handing out diplomas to the military academy's graduates. The president was helped up by a group of officials, and the White House said he was fine.

Biden, who is the oldest president in American history at age 80, delivered the commencement address at the Colorado Springs, Colo., academy and then stood near the front of the stage for about two hours, saluting the new graduates and shaking their hands.


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(END) Dow Jones Newswires

June 02, 2023 06:01 ET (10:01 GMT)

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